Build a dream house
The Guardian 10/06/00
Building your own home to your own specification is for most people a daunting but ultimately rewarding task. But easing the path is the growing number of lenders now willing to back your self build home with hard cash.
Norwich & Peterborough building society is the market leader for self-build home loans, with more than 10% of all of its mortgages granted to self-builders. But there are a number of other lenders entering this growing market, from the Ecology building society, a specialist in environmentally conscious homes, through to giant high street names such as Lloyds TSB.
Moneyfacts lists 31 lenders who offer finance packages for self-build. However, you will still need a reasonable reserve of cash to start the process. The main rule of thumb is that a lender will give you up to 80% of the valuation or purchase price of the plot of land and release more money to cover the cost of building in stages dependent on an ongoing valuation. Most will release the full sum of money (with a maximum of 95% of valuation) once the roof is in place and the building is near completion.
Mortgage companies insist that the self-build project has to be for your own occupation and nearly all rule out lending against the building of flats or maisonettes.
Plots of land for a decent-sized home rarely come cheaper than £40,000-£50,000, and building a 125sq m home adds at least another £80,000-£90,000, so anybody thinking of self-build should have at least £20,000 initial capital to invest, and probably much more to finance building ahead of the staged release of mortgage finance.
The good news is that Norwich & Peterborough estimates that, on average, self-build homes cost around 20% less than buying the equivalent home on the open market.
Before they will grant you a mortgage, lenders will want to see a number of documents:
• Outline planning permission for the initial advance.
• Detailed planning permission for the first stage of building finance.
• Building regulation approval.
They also want to know who is building it. "Self-build is a bit of a misnomer. You can do a self-build without ever picking up a brick if you use sub-contractors, although the cost of labour can mount up," says N&P's Alison Lipscombe.
However, your lender will want to be satisfied that the builder or contractor is a reputable company and is registered with the NHBC. Generally speaking, self-build is not for the keen DIY amateur, although there is a growing number of house building kits on the market.
Lenders also want to be sure that if you need to sell the property, they can recover the mortgage outstanding. Architect Heimer Salt, who formed a self-build project in Leeds to erect three terraced houses, found that big lenders were less than enthusiastic about his more radical design ideas.
"If you say you are doing a timber-frame building with a turf roof, they immediately put the phone down on you," he says. Mr Salt turned to the Ecology building society. This lends to individuals wanting to build homes with a low environmental impact in terms of energy use, pollution and saving resources. "Additionally we ask if it will be a healthy home and cheap to run," says Ecology's George Penaluna.
Once you have found a plot of land, a lender and a builder, the next stage is obtaining the staged release of funds during the building process. For example, N&P gives you 15% of the total loan amount once the foundations are in place, a further 15% at first floor joist level and 15% at wall plate level. "At each stage the society's valuer will carry out a re-inspection before the next stage payment can be released. Architects' certificates will also be required where appropriate," it says.
Anyone considering undertaking a self-build should also factor in other costs. The list can run on and on and includes valuation fees, the cost of connecting services such as electricity, gas and water, professional fees, VAT, stamp duty and legal costs.
Making a realistic assessment of the true costs of self-build is essential:
• Don't turn a blind eye to what the real costs are going to be, or rely on the black economy to cut corners.
• Assess how long it will take; the fastest self-build kits can be put up in a few months, although most projects take at least one year.
• Think about employing a project manager. Although this can add 15% to the total costs, not having one will mean that you have to deal personally with the architectural plans, planning permission, ordering and delivering materials, handling sub-contractors and so on.
• Begin the work in winter, when contractors can be both cheaper and easier to hire.
• Avoid paying unnecessary VAT. You can get back all the VAT you pay on materials by registering as a self-build project before you begin work, so remember to save your receipts.
• Maximise the amount of labour time you can put in, as labourers cost anything from £50 to £100 a day.
• Obtain an NHBC 10-year certificate at the end of the project. These cost only a small sum, although you will have to pay surveyor's fees.
Anyone thinking of starting a self-build project still has time to visit the Southern Homebuilding and Renovating Show this weekend, which closes on Sunday June 11 at 5pm. The show is held in Sandown Park Exhibition Centre in Surrey. Free tickets from handrshow@aol.com.
• Norwich & Peterborough: www.npbs.co.uk or 01733-372372. Ecology building society: www.ecology.co.uk or 0845-674-5566. Association for Environment Conscious Building: 01559-370908.
Everyone thought we were mad - but it was worth it
Tootie Russell had just had her sixth child, Nick, and her husband David was setting up a wild flower seed business. The right time, then, for them to begin building a six bedroom home with almost no outside help?
"I know everybody thought we were mad," says Mrs Russell. Seven years later, with the house complete (and worth nearly 10 times the cost of building) she will tell anyone considering doing it themselves to think long and hard. "We came close to divorce several times. At one time I fell off the chimney, 26 feet up, and was on crutches for nearly two months. David just wanted to know when I could get back to work on the house. About the worst point was when I got a set of chisels for my birthday."
The family of eight lived for years in a caravan attached to the two-bed bungalow on the four acre plot they bought in the village of Osmington in Dorset for £38,000. With little spare cash, they did nearly all the work themselves, including installing the electrics, plumbing and drainage, although the installation had to be certified by experts to meet building regulations.
Building costs were around £40,000, and now the six-bed, three-bathroom home is valued at around £330,000. On paper, it sounds like a no-brainer, but Mr Russell warns: "You have to be completely resolute and see it through.
"You have to be very adaptable, able to cope with bad weather, endless setbacks and help not materialising. When things go wrong, it's easy to get disheartened." Mr Russell's top tip is to make sure your plans and drawings are as detailed as possible before you start. "A good drawing complete in all details from an architect saves you a host of problems."
Shopping around for building materials also saves you a small fortune. The Russells wanted their house to be built in local stone, but it turned out to be very pricey. Then they found a school in nearby Dorchester which was being demolished. "We got the stone very cheaply. I think of myself living now in a DIY Corfe Castle," says Mrs Russell.
In total, the Russells had to buy 18 tons of tiles, a mile and a half of boarding and one and a half hundredweight of nails. That was on top of Mr Russell struggling to keep his wild flower seeds business, Heritage Seeds, afloat during the recession.
Now with the house complete and the business thriving, the Russells can afford to relax.
Heritage Seeds, tel: 01305-834504
